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LA Senate panel fails to produce adequate tax cut bill

Yesterday the Louisiana Senate’s Revenue and Fiscal Affairs Committee passed along an amended SB 66 by Sen. Robert Adley. It restores some deductions to income tax liability previously enjoyed until a few years ago by Louisiana income taxpayers, phased in over the next few years. While it’s an adequate start, that committee itself missed a golden opportunity to really offer tax relief and boost the state’s economy by its rejection of another bill.

SB 29 by Sen. Max Malone would have phased in over four years a complete elimination of income taxes, both personal and corporate. Several states presently do not have income taxes, including next-door neighbor Texas, so the idea is not unprecedented.

Yet the committee dealt with the bill in an unserious, almost flippant manner. Vice Chairman Adley declared that, with the estimated $3 billion a year reduction in revenue that eventually would be lost from this source (about three-quarters of it from the individual side), that it was “irresponsible” and wondered where other sources of funding could come from. In mere minutes, the matter was concluded and the entire committee except for Malone voted against it.

This cursory treatment was odd considering that Louisiana traditionally annually has difficulty in government funding services (unless, as is the case presently, a federal government windfall gets pumped into the state) and is one of the poorest states in the Union. Obviously, the tinkering at the margins Adley and others timidly have pursued has done little, if anything, to change this situation, so that Malone’s idea was dismissed so easily just indicates the wages of this shallow thinking and inferior legislating.

Obviously, as other states have no income tax as policy and are better run and more economically developed than Louisiana, the idea works. But if Adley and others are so concerned about other funding, they should consider three options together which will provide some more funding and bring greater sanity to the state government fiscal process that will encourage economic growth.

The big problem with individual income tax in Louisiana is that it soaks the wealthy and middle class, the most productive users of financial resources reliance upon which will maximize economic growth. (Perhaps this is a reason why Democrats like Adley or Gov. Kathleen Blanco seem so resistant to cutting income taxes – they see government primarily as a redistributive instrument of wealth.) A shift to a broader-based tax instead of this is what’s needed for economic development.

Discussion about this alternative for years has floated around: change the property tax structure. Louisiana’s highest-in-the-country homestead exemption not only soaks the middle class and wealthy, but also the poorer who only can rent, and business. Lowering it would spread out the burden and would give almost all parishes more operating funds, allowing the state to cut back on its contributions.

In addition, the state could levy its own property tax (it does not but is empowered to do so up to 5.75 mills). Almost everybody probably would pay no more in taxes if this swap for income taxes is made and a significant chunk of that $3 billion would be made back up by the reduced revenue sharing and state property tax creation.

Still worried about a shortfall? Then cut spending, something Blanco and Senate Democrats seem loath to do by their attempting to push through changes to the indigent care system in the state that threaten to increase costs and decrease quality in order to protect special interests. True reform of the system could bring substantial savings to the state in a few years.

While SB 66 will bring benefits, it’s not even close to the answer to put this state on a solid fiscal footing by encouraging sufficient economic growth. Off-hand rejection of SB 29 once again shows too many of Louisiana’s elected officials simply are not doing adequately the jobs for which they were elected.

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